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Canada’s skills shortage may not be as dire as some people fear, a report by TD Economics says.

The report purports to throw “cold water” on the idea that Canada is facing a severe and imminent skills crisis characterized by large and persistent job shortages and a “lost generation” of younger workers.

Called Jobs in Canada, the report acknowledges that there is some evidence of skills mismatches across certain occupations and provinces, and that the challenges facing younger workers have increased since the Great Recession of 2008.

But things may not be as bad as feared, the report to be released Tuesday concludes.

“Perceptions can take on a life of their own without hard underlying facts supporting them,” said Derek Burleton, a deputy chief economist at TD Bank Group and co-author of the report.

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“The point here is to put a little bit of balance around some of these issues,” Burleton said in an interview. “We don’t see the system as being completely dysfunctional. We see vulnerabilities that need to be addressed.”

The report comes amid a heated public debate over what to do to ensure Canada remains competitive in a rapidly changing environment. Prime Minister Stephen Harper has called the skills shortage one of Canada’s most pressing economic problems.

The Conference Board of Canada has estimated the country faces a shortage of 1 million workers by 2020.

Many employer groups — including those who hire engineers, computer programmers and food service workers — have also predicted shortages of specific skills.

Experts say globalization, an aging baby boom population and technological change will all contribute to a shortage of skilled workers in the future.

The debate has shone a spotlight on the need for more education and training. But some of the federal government’s solutions, such as allowing more temporary foreign workers into the country, have also sparked controversy.

To test these assumptions, the TD report looked at unemployment rates, wage rates and unfilled job vacancies in 140 different occupations and got some “surprising” results.

In some occupations widely thought to be in shortage — such as trades, engineering and health care work — unemployment rates were considerably lower than average while the rate of unfilled jobs was only moderately higher, the report found.

The report also found recent university graduates — even those with liberal arts degrees —are not all “flipping hamburgers” but are relevant finding jobs, though some take longer than others.

As expected, employers in fast-growing, resource-rich Alberta and Saskatchewan were having more trouble filling jobs, even in categories where there’s believed to be a surplus of labour, the TD survey found.

However, wages in those occupations have not risen as much as expected, the report noted. Burleton speculated that bonuses may be playing a bigger role in compensation and thus don’t show up in base wage rates.

The report noted that Canada’s job creation performance over the past decade has been strong, especially compared to other G7 countries, thanks to rising global demand for oil and a strong domestic housing market.

However, there have been some “monumental” shifts in the labour market, including greater participation by older workers and a trend toward more contract and temporary positions, the report found.

The report also found Canada’s labour market is becoming more polarized, with greater demand for high-skilled and low-skilled workers, while medium-skilled work is on the decline.

The report says employers need to provide better wages where required, more training and flexible work arrangements. The provinces need to remove barriers to working across Canada. Students need to develop a better understanding of the labour market. And schools need to move quickly to meet changing demands.

One of the biggest challenges to figuring out whether the current skills mismatch is any worse than any others have been is the lack of hard data, Burleton said.

“We’re flying in a fog without instruments,” he said.

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